Observations on Corporate Citizenship

By Anthony R. Russo, CPA, Rye Brook, N.Y.

During the last 20 years, I have been the CEO of two major companies. The first was a publicly held financial services company. More recently, I cofounded a corporation that comprised 50 shareholders worldwide and engaged in the development, manufacture, and marketing of dietary supplements. I have always paid particular attention to society’s expectations of businesses and how those expectations affect the company that I am running.

No matter how focused a corporation is on its mission, its responsibilities to its shareholders and employees, its business strategies, and its own success, it must also match the expectations of the people and institutions around it in order to create the right perception in the marketplace. The body of opinion—either of consumers or other businesses or institutions—must recognize the company as a good citizen. The opinion should include the perception that the company is promoting equality and fairness in its relationships with people, demonstrating leadership in the wise long-term allocation of resources, and contributing to the community’s philanthropic needs.

Promoting equality and fairness in a company’s relationships is easier said than done. The pressure from discrimination suits, harassment claims, and other legal actions provides an incentive to keep the company honest, but also presents a major task for management. The small-minded businessperson who wishes to cut corners on wages, take advantage of vendors, save money on quality control, or squeeze a couple of days’ interest out of the bank will face a lot of external pressure. The temptation is strong, but one must resist if one wishes to be an effective captain of industry. The company should be committed to caring for the people with whom it transacts business; any other attitude is inconsistent with business growth and success. Treating employees, lenders, shareholders, and customers fairly builds confidence, admiration, and respect for a manager. Treating people right results in a business with a history of successful relationships and a foundation for solid growth.

The wise long-term allocation of resources is an economic necessity. The responsible use of our environment and our resources is not new; it’s just hard work. If it fails to meet certain expectations, a company may fall prey to the vociferous activists, zealots, and fame-mongers that operate at the edges of mainstream opinion. It’s easy to defer action on sensitive issues and give priority to short-term profit and instant gratification, but this leads to a complacent inertia that resists imaginative and enlightened solutions that sustain the company’s mission—in a word, change.

Change is a concept that terrifies the mediocre. Yet, building goodwill and earning the marketplace’s respect requires that a company evaluate the environmental impact of its business plan. Whether it consumes natural resources or produces a product that requires careful use or disposal, a company must set a good example. The business, and therefore the viability of the corporation itself, will be negatively affected without a credible plan in harmony with contemporary expectations regarding our environment, safety, aesthetics, toxicity, and disposability. The business that does not have a positive attitude toward preservation and ecology will not survive.

Rising to the occasion in fulfilling one’s responsibilities to the community is probably the most important strategy in building a company’s value. Society expects certain industries to promote research, mitigate disease, provide aid for the underprivileged, and support the arts: A company is expected to “give something back.” Whether it is in the form of rebuilding cultural centers, revitalizing inner-city neighborhoods, creating partnerships with charitable organizations, or sponsoring an annual arts fair, the business establishment has a responsibility to invest in the soul of the community and contribute to its well-being.

My best advice to plan for a “good citizen” strategy is to go back to some basic issues. Revisit the company’s purpose: Is its mission statement consistent with the corporation’s current goals and objectives? Are the communications with shareholders, employees, customers, and other stakeholders clear and current? How management communicates purpose and the milestones in the maturation of the business will help everyone understand and support the mission of the company.

I propose that the modern manager promote and reward civic-mindedness among all employees. The company will gradually take on the cumulative character of the key people who will influence its success, thus improving the perception of its fair play with people and the environment.

One must remember to exercise care and judgment in selecting philanthropic activities and cultural causes. Make sure that the mission of the cause is compatible with the company’s own mission and that an alliance will contribute to the success of both. Finally, “do what feels right”—often there is no better advice than “do unto others as you would have done unto you.” Success carries with it the burden of leadership; the successful business manager’s responsibility is to use it wisely.

The CPA Journal is broadly recognized as an outstanding, technical-refereed publication aimed at public practitioners, management, educators, and other accounting professionals. It is edited by CPAs for CPAs. Our goal is to provide CPAs and other accounting professionals with the information and news to enable them to be successful accountants, managers, and executives in today's practice environments.